Condo Versus Homeowners Insurance: 2 Differences

If you find yourself in the market for condo insurance, you'll be pleased to learn that the cost of condo and townhouse insurance is typically less than what you'd have to pay for a similarly valued single family home. There are a few reasons for this, the main one being the amount of the residence you're required to cover in your policy.

Here are two things that differentiate standard homeowner's insurance from condo insurance:

1. Homeowner's insurance is designed to offer protection from losses occurring to your entire property, including outer structures unattached to the house proper. This could include a garage, shed, well house, fence, etc. Condo insurance is designed to cover your unit only, with the outside land, the building structure itself and common areas covered by a separate insurance policy that's cooperatively owned by all the residents in your facility and paid for by the HOA (homeowner's association).
2. Condo insurance only covers “from the sheet rock inward.” Your personal condo insurance doesn't cover the exterior walls or the roof, for example, which would fall under the coverage of the HOA policy.

Do You Need Insurance?

Just as with a standard homeowner's insurance policy, condo insurance will be required by your mortgage holder as a means of protecting their financial interest in your residence. Even if your condo is owned free and clear, however, there are a number of reasons you should have coverage in force. If a fire were to damage the inside of your residence, for example, your condo coverage would protect you from the financial loss of repairing your dwelling and replacing your personal property and other possessions.

Your condo insurance also provides loss of use benefits, which pays for temporary living facilities for the period of time your home is deemed unlivable. Another important benefit your condo insurance provides is liability coverage in the event that someone is injured or their property is damaged while they are in your home. This coverage not only pays toward medical expenses for dealing with their injuries but also legal aid in the event they take you to court to recover damages.

Finally, your condo insurance will provide you with reimbursement should you suffer a loss through vandalism or theft. This typically even pays for losses of personal property you suffer when you're at a location other than your home, such as when staying at a hotel.